Whistleblower Suit Over Feds’ Bilking Tossed

SAN FRANCISCO (CN) — A federal judge tossed a lawsuit accusing Sprint, AT&T and others of overcharging the federal government $2.56 billion for wireless services, even as he gave federal agencies the chance to enter the fray. U.S. District Judge Charles Breyer on Thursday dismissed with prejudice the 2013 action brought by whistleblower Richard Knudsen, finding Knudsen didn’t meet the specificity requirements necessary under the False Claims Act despite two opportunities to amend his complaint. Knudsen also failed to provide key information he said he had and which Breyer requested, indicating he didn’t actually have it, Breyer said. The judge nonetheless granted the federal government leave to amend. It had previously filed a statement of interest in the case. Justice Department spokesman Abraham Simmons declined to comment on the case. In his 27-page ruling Breyer wrote, “Although Knudsen claims to be the ‘ultimate insider,’ he still cannot allege with particularity the defendant subsidiaries involved, the governmental agencies using their services, or distinctions between the acts of the different sets of defendants.” Knudsen, a tech support and contract compliance consultant, accused the phone carriers of overcharging the federal government for cellular and data services based on service contracts between the carriers and the city & county of San Francisco and the city of Los Angeles. He claimed the carriers charged wireless fees that didn’t reflect their contractual obligations with the two cities. Knudsen conceded he only analyzed billing data from Cellco, and estimated how much Sprint and AT&T overcharged federal agencies based on that analysis. He concluded that the carriers bilked more than 701 federal agencies out of $2.56 billion by failing to offer them the same plans and discounts they gave to their pools of “most favored customers.” They also charged the government state and local taxes and surcharges that were already included in the plan rates. In dismissing Knudsen’s complaint with leave to amend in June 2015, Breyer ordered Knudsen to cure five deficiencies in his pleadings, including alleging violations beyond breaches of contract and grounding the violations in the relationship between the carriers and the federal government. In October 2015, Breyer dismissed Knudsen’s first amended complaint, finding he hadn’t addressed all of the deficiencies. A second amended complaint only cured the breach of contract deficiency by showing that the carriers sent the government fraudulent monthly bills. According to Breyer, Knudsen also again failed to ground the alleged violations in the relationship between the carriers and the government by neglecting to identify the federal agencies that used the carriers’ services. And he didn’t produce a concrete figure for the alleged overcharges. “Knudsen’s attempt to ground his claims in the actual relationship between defendants and the federal government is still insufficient,” Breyer said in the Thursday ruling. “These details about the contracted terms are the foundation of Knudsen’s claims, and it appears that he cannot add further detail.” Breyer further found that Knudsen hadn’t shown the contracts were tied to best pricing, and hadn’t provided a list of the customers that comprised the carriers’ most-favored-customer pools, invalidating his claim that the carriers didn’t give the federal government the same service discounts they gave their most favored customers. Instead, Knudsen assumed the most favored customers received the best rates, and that if the carriers gave them better rates, it meant they were overcharging the federal government. “This kind of surmise is insufficient to specifically allege that there were price reductions to the [most favored] customers not extended to the government,” Breyer said. “We’re pleased with the ruling,” AT&T spokesman Marty Richter said Friday. Attorneys for Knudsen and Sprint could not be reached for comment. Knudsen was represented by Christopher Dolan of the Dolan Law Firm in San Francisco. AT&T was represented by John Richter of King and Spalding in Washington. Sprint was represented by Ashley Hardin of Williams & Connolly, also in Washington. The United States was represented by Assistant U.S. Attorney Steven Saltiel in San Francisco.